A lottery is a method of raising funds for public or private purposes by giving away prizes to the winners, who are chosen at random. Normally, the money spent to buy tickets and stakes is pooled together for the purpose of drawing lots; in some countries, this is done by using a computer system that records purchases and prints ticket stubs. The lottery may also make use of regular mail to communicate with players and send prize monies. However, postal rules generally prohibit international mailings of lotteries, and smuggling and other violations of these regulations occur.
The term “lottery” is derived from Middle Dutch Loterie, which is in turn probably a calque on Middle French loterie and Old Dutch lotinge, both meaning “action of drawing lots.” In the fourteenth century, it was common in the Low Countries to hold public lotteries to raise money for town fortifications and help the poor. The practice spread to England and, with Protestantism’s strong aversion to gambling, was widely adopted in the American colonies, where it was hailed as a painless form of taxation. Harvard, Yale, and Princeton were all partially financed through the lottery, and the Continental Congress attempted to use one to help pay for the Revolutionary War.
While wealthy people do play the lottery, they buy far fewer tickets than those who make less money. The average player making more than fifty thousand dollars a year spends only one per cent of his or her income on tickets; those who make less than thirty thousand dollars spend thirteen per cent. The reason is that the rich have more disposable income to spend on lottery tickets. They also have better credit ratings, which allow them to buy more tickets.
In the nineteen seventies and eighties, America’s obsession with winning the lottery coincided with a decline in financial security for the working class. The gap between rich and poor widened, job security and pensions disappeared, and health-care costs rose. For the first time in history, it was no longer possible to take for granted that a life of hard work would guarantee some measure of economic security.
Although the chances of winning a lottery prize are very small, many potential bettors still feel attracted to the idea of winning large sums. For this reason, some lotteries award very high prizes while others offer a large number of smaller prizes. In either case, a percentage of the stakes must be used to cover costs and for profits, leaving only a portion available to winners. This is a decision that must be made carefully to maximize revenue and minimize costs.